When an employer sits down with his health care partners – broker, health plan, physician, hospital, drug and device firm, health IT firm – everyone but him wants health care to cost more, and each is typically in a position to make that happen.

Lynn Jennings, CEO, WeCare TLC

A new class of health care management organization is emerging that thrives by taking advantage of health care’s rampant and institutionalized waste. These firms mine the market dysfunction that has developed over decades, which will almost certainly yield enough fuel to drive a new way to manage care and cost.

The founders of these organizations have deep health care experience, and they understand the mechanisms of excess. More important, the ones I’ve met are mission-driven, with a deep sense of outrage that health care’s exploitation has become so pervasive and overt. So their businesses are purposeful.

They know that supply chain, health information technology, care delivery and health care finance firms have devised dozens of ways to drive unnecessary care and cost, often operating outside of market-based rules and delivering only nominal value. And that these forces explain why US health care costs double what it does in other developed nations, and why credible studies estimate that half (or more) of all our health care spending delivers no value.

Most of the mechanisms of excess are embedded in business practice or in policy, so they are difficult to see. Under business practice, think of hospitals that pay physicians a percentage of the value of what they prescribe, driving up utilization. Or health plans that pay three to five times more for high value products/services than what any volume purchaser can negotiate in the marketplace, driving up premium.

In policy, think about Medicare’s fee-for-service arrangements that promote unnecessary care and inhibit innovation that is focused on better management. Or the medical services valuations under Medicare that have been jiggered by the specialist-dominated American Medical Association RVS Update Committee (RUC), over-valuing specialty care at huge expense to patients, purchasers and primary care. Or PhRMa’s Medicare D deal with Congress that prohibits competitive bidding for drug purchases. There are many more examples.

Against this backdrop of widespread intentional misuse, these new firms are founded on at least six key ideas that strikingly contrast with most other health care firms.

First, their business models create value for clients by isolating and disrupting as many distinct mechanisms of health care excess as possible, and by driving appropriate care and cost.

Next, because the mechanisms of health care waste are embedded, not just in care delivery, but in every health care sector, efforts to manage them must be full continuum and inter-disciplinary, with many vectors deployed simultaneously. No single approach – e.g., primary care medical homes, wellness/prevention, disease management, health analytics and clinical decision support – is enough to create a sustained level of impact that, while improving health outcomes, consistently saves more than it costs. Further, the expertise required to effectively manage goes beyond clinical skills, health plan mechanics, risk, technology, policy and many other disciplines.

Third, these firms establish comprehensive primary care practices that provide not only life management and convenience care, but that facilitate significant steerage and control over downstream care. (Some also provide occupational health services, for a broader impact.) Most are developing powerful back offices, with robust health IT, analysts and medical managers focused on the identification and management of clinical and financial risks. These capabilities favor evidence-based care, guiding clinical decision support and other activities aimed at improving health outcomes while reducing unnecessary cost.

Fourth, these companies are structured to optimize value for patients and purchasers first (rather than for the vendors), and they do so transparently, following market principles. For example, most operate outside fee-for-service reimbursement. So rather than having an incentive to deliver more products and services, making a margin on each one, they are paid to manage the care and cost processes. This means they have no incentive to deliver unnecessary care (or deny necessary care). Instead, they are rewarded if they implement mechanisms that ensure the appropriateness of care throughout the care continuum.

And, sixth, because it can leverage market forces, driving better local and national pricing with volume, its capacity to succeed increases with scale. This means that, in the context of existing health care, this new approach has the potential to rapidly grow and displace convention.

I know of several organizations, each in different stages of development, that follow these themes: WellPortal, Iora Health, Chen Medical Centers, Qliance and WeCare TLC. They have first succeeded in different sectors – employee health, worksite clinics, Medicare management, chronic disease management, Direct Primary Care – but have realized that producing greater value requires broadening their management toolkits and skillsets beyond excellent care delivery. All are intent on focused management of every type of excess, and most can already show powerful results.

Health care cost has become an overwhelming national problem, so a cottage sector that can thrive by taming the industry’s most corrosive practices is potentially as game-changing as genomics or nano-technology.

More pragmatically, though, the new enterprises of health care management will prove a breath of fresh air for patients and purchasers, and a startling revelation to the entrenched and overfed health care industry.

Brian Klepper, PhD is a health care analyst, and Principal/Chief Development Officer of WeCare TLC, a worksite clinic and medical management firm.